Seccondary reserves to borrowing from federal funds market

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Reference no: EM131565969

Savings and loans associations (S&Ls) have recently moved away from using securities as seccondary reserves to borrowing from the federal funds market if they need emergency reserves. The reason for this change in policy seemsto be that, with relatively low interest rates in the U.S. economy, S&Ls are not earning that much interest income from their securities portfolios and federal funds rates are presently relatively low (thus borrowing costs in this market are relatively low). What effect would this recent shift in S&L policy have on their funds GAPs? Explain.

Reference no: EM131565969

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